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When inflation > interest rates, saving is a loss making activity. That's the environment we've been in from 2008 until about 2022. You're not wrong and I am

When inflation > interest rates, saving is a loss making activity. That's the environment we've been in from 2008 until about 2022. You're not wrong and I am the same as you, but we can't blame people for adapting to their circumstances...

lotsofpulp 4y ago
Retirement savings means investments, not FDIC insured savings accounts. However, it has not been that long that it has been as easy as opening a Vanguard/Fidelity/Schwab account and buying an index ETF or target retirement date ETF, so I cannot blame someone in their 50s and 60s today for not following advice that has only been easily accessible for 15 or 20 years.
- cykros 4y ago
  This. Also, we take 401(k)'s for granted, but even those are only a little more than 40 years old, and widespread use did not happen instantly. That Gen X didn't make hefty use of them is hardly surprising, given the limited access along with the limited education in place. Their parents had defined benefits pensions. Their children have commission free IRA's, 401(k)'s, variable annuities, and a handful of other lesser known alternatives. They got the 70s and 80s economies to grow up in, and the dot com bubble, GFC, and now a looming recession after many got sucked into some YOLO moonshot plays in the bull market of 2021, upon realizing how much ground they needed to try to make up rapidly. I don't envy their situation.
rhacker 4y ago
If you have non-mortgage debt, it makes no sense saving (unless you're just saving for a temporary large purchase like a house).
- cykros 4y ago
  That depends if it's fixed rate debt or not. Fixed rate debt that came about over the last decade is often accruing interest at a lower rate than you can reasonably get with some fairly safe instruments, be they treasuries, money markets, or some more exotic fixed income securities. If you're paying down debt financed at 5% and getting a 7% return on your savings, it's a non-trivial decision to pay it down any faster than you absolutely have to. I'm sure in no rush to pay down my car loan any quicker than is required.
BlandDuck 4y ago
This is not correct. Not saving will leave you with nothing. Some saving will leave you with something, regardless of the inflationary and interest-rate environment. What inflation > interest implies is that you should try to place your savings in in real assets, i.e., assets that are inflation protected, rather than in assets that just pay interest, such as bonds. In an inflationary environment, saving up to purchase a house can be an enormous, life-altering financial windfall for those who can do it.
jquast 4y ago
Retirement accounts aren't in high-yield savings accounts. Using S&P 500, $1 in 2008 would be $2.61 at the end of 2023. Average APR is 8.45%, while bank savings is 3.5% right now. Just a few hundred a month could have made you a millionare today through dollar-cost averaging. Deciding not to invest because you think our economy isn't as great as before is a terrible reason not to invest. If you are trying to "time the market" with your retirement account and believing that no time in the past 12 years is a good time, rather than dollar-cost averaging and investing all throughout, you're really screwing yourself over

lotsofpulp 4y ago

Retirement savings means investments, not FDIC insured savings accounts. However, it has not been that long that it has been as easy as opening a Vanguard/Fidelity/Schwab account and buying an index ETF or target retirement date ETF, so I cannot blame someone in their 50s and 60s today for not following advice that has only been easily accessible for 15 or 20 years.

cykros 4y ago
This. Also, we take 401(k)'s for granted, but even those are only a little more than 40 years old, and widespread use did not happen instantly. That Gen X didn't make hefty use of them is hardly surprising, given the limited access along with the limited education in place. Their parents had defined benefits pensions. Their children have commission free IRA's, 401(k)'s, variable annuities, and a handful of other lesser known alternatives. They got the 70s and 80s economies to grow up in, and the dot com bubble, GFC, and now a looming recession after many got sucked into some YOLO moonshot plays in the bull market of 2021, upon realizing how much ground they needed to try to make up rapidly. I don't envy their situation.

rhacker 4y ago

If you have non-mortgage debt, it makes no sense saving (unless you're just saving for a temporary large purchase like a house).

cykros 4y ago
That depends if it's fixed rate debt or not. Fixed rate debt that came about over the last decade is often accruing interest at a lower rate than you can reasonably get with some fairly safe instruments, be they treasuries, money markets, or some more exotic fixed income securities. If you're paying down debt financed at 5% and getting a 7% return on your savings, it's a non-trivial decision to pay it down any faster than you absolutely have to. I'm sure in no rush to pay down my car loan any quicker than is required.

BlandDuck 4y ago

This is not correct. Not saving will leave you with nothing. Some saving will leave you with something, regardless of the inflationary and interest-rate environment. What inflation > interest implies is that you should try to place your savings in in real assets, i.e., assets that are inflation protected, rather than in assets that just pay interest, such as bonds. In an inflationary environment, saving up to purchase a house can be an enormous, life-altering financial windfall for those who can do it.

jquast 4y ago

Retirement accounts aren't in high-yield savings accounts. Using S&P 500, $1 in 2008 would be $2.61 at the end of 2023. Average APR is 8.45%, while bank savings is 3.5% right now. Just a few hundred a month could have made you a millionare today through dollar-cost averaging. Deciding not to invest because you think our economy isn't as great as before is a terrible reason not to invest. If you are trying to "time the market" with your retirement account and believing that no time in the past 12 years is a good time, rather than dollar-cost averaging and investing all throughout, you're really screwing yourself over